“We Need to Review Our Economic Strategy”

-CBL Executive Governor-Designate Tells Senate

The Executive Governor-designate of the Central Bank of Liberia (CBL) has emphasized the need to review the country’s current economic strategy in terms of reducing reliance on the enclave sector and move onwards towards the agriculture manufacturing sector.

Mr. Nathaniel Patray made the statement over the weekend when he appeared for confirmation before the Senate Committee on Ways, Means and Finance at the Capitol Building.

“If we should achieve a sustainable growth and ensure a sustainable improvement and development of our economy, we will need to review our current economic strategy in terms of reducing our reliance on the enclave sector, and move onward towards the agriculture manufacturing sector,” Patray, an economist and banker, told the committee.

He added that in order to create more jobs for our people, “this I know is cardinal to the national development plan, which will be launched by President George Weah shortly.”

Mr. Patray said the anticipated recovery in growth remains far lower than the country’s pre-crisis economic growth rate of 7.5 percent and slightly lower than both sub-Saharan Africa and global growth rate of 3.4 percent and 3.9 percent.

At the end of May this year, Mr. Patray recalled that headlines in inflation stood at 21.3 percent, compared to 13.2 percent a year ago, as the Liberian dollar recorded 4.1 percent depreciation against the United States dollar during the same period, which he said has culminated in welfare loss, reduction in the purchasing power of most Liberians, especially the poor.

“Therefore, when confirmed, we at the CBL will embark on the use of a mix of available monetary policy instruments to first and foremost ensure broad exchange rate stability, low and stable inflation in the Liberian economy,” Patray, who is expected to be confirmed Tuesday, assured.

“While it is true that the prevailing economic fundamentals are unfavorable, I believe a combination of various policy measures and tools from both the fiscal and monetary sides can help reverse the growing exchange rate depreciation and inflationary pressure, and put our economy back on the path of growth and stable inflation,” Mr. Patray maintained.

This is why, he said, the technical economic management team (TEMT) was recently constituted by President Weah, to examine prevailing micro-economic issues, challenges and come out with policy options for economic recovery.

He said the TEMT team has been working for weeks on major short-term measures to help resuscitate the economy with the following key issues: the sustained decline of the Liberian dollar, which has continued for years through double digit rates of depreciation; and high level inflation, which persists and remains in sight largely on the back of continued depreciation of the Liberian dollar.

The policy objective of the TEMT is to take immediate action, to ensure broad exchange rate stability and price stability (meaning low and stable inflation). Under the proposed policy measure, Mr. Patray said the economic team will meet and agree on a number of monetary and fiscal policy measures to be implemented in July, 2018.

Mr. Patray added that the policy options, which are two-fold, include the short-term to resuscitate the economy, and medium term measures to revamp and sustain economic recovery.

Under the short-term measures for 2018, he said that the economic team has directed the CBL to issue directives to commercial banks to stop the payment of all Liberian dollars legacy note; the old notes to the public to help withdraw the legacy notes; reduce the volume of legacy notes in circulation and control counterfeiting; that the CBL carries out foreign exchange auction exercise in the amount of US$25 million to help meet the demands of the foreign exchange market; minimize the high level of volatility in the foreign exchange market and ensure broad stability in the exchange rate.

Also, he disclosed that the CBL has been directed to issue a regulation on currency holding, to help reduce currency outside banks, ensure greater control of the currency in the economy and encourage broad exchange rate stability; that CBL in collaboration with the relevant stakeholders, the Liberia National Police (LNP), Monrovia City Corporation (MCC) and Paynesville City Corporation (PCC), heighten and sustain its enforcement and monitoring exercises to help weed out unlicensed operators, minimize speculations, and control or eradicate quotation of rates and bring order and sanity in the foreign exchange market.

No doubt, a doctor can diagnose an illness and prescribe when and how the patient should take dosages bitter medicine, but getting healed depends on following the orders to the letter. If rabble- rousers and other troublemakers don’t threaten the current “relative” political stability, a people-specific developmentminded Weah government is going to abide by the nominee’s hints about an alternative “economic strategy”.

The question is, would elitist-driven groups, who foresee that meaningful development under his leadership could make the 2023 presidential election a foregone conclusion, not try to stoke confrontation, confusion, and commotion?

However, some simple things can become difficult or render a policy directive ineffective and not necessarily because of some elitist-driven opposition. I am trying to be objective here, and I think couple of things will have to be thoroughly investigated. Take for example, if the constant rumours (even stated by the IG without any proof) that counterfeit banknotes are flooding the market, the tendency is that ordinary citizens and business people may reject and withhold the old banknotes for genuine security to avoid being dupe. This incidence could have the opposite effect of any policy directive to correct the prevailing situation.

Therefore, a thorough investigation will have to carryout. We have to be clear first, whether excess new banknotes were printed and second, are all printed new banknotes within current vault inventory? Third, is there a genuine concern that excess banknotes were printed outside stipulation given the hasty contract and printing without the HOUSE sanction?

I know these are speculations but genuine questions given that the past administration was not forthcoming when question about its authority to print new banknotes couple with the CBL refusal to disclose how much was printed. I am just a bit concern and truly worry about how the ordinary Liberians are being played while others seem please to make the issue a rhetorical one – all talk no show.

Sylvester Gbayaforh Moses, I see no reason to comment any further on your fear and understanding of the situation. But surely, from what we know among several proven cases, an understanding of the problem and what measure to take are the basics of the success equation. The Governor has outlined his strategy and tools for finding the solution. But I am inclined to appreciate his farsightedness to hint that the problem is not a quick fix and will require a collective support from all Liberians. Leaders who seek collective support are broad-minded and are always on the top for success than those leaders who stand with the self-incline arrogance of “me” or “I”. This call is commendable and is specifically urging oppositions to consider the down trend of our economy as Liberia problem and not a George Weah problems. I am confident the Govenor is on his way to succeed with the “we all” approach.

I am observant of how folks in Liberia can easily get carried away with a person’s expertise in a particular area and suddenly defer to the person for advice on issues that should be addressed by the appropriate agency or official of government. The comments attributed to the designated Governor includes a suggestion to reduce “reliance on the enclave sector and move onwards towards the agriculture manufacturing sector”. From reading the article, it appears like a policy statement of what the Central Bank would be attempting to implement. I understand as an economist, his personal assessment of what should be included in any economic revival program should include the move towards agriculture manufacturing sector. But if this a suggested policy statement of what the Central Bank would be doing, then you would end up with the CBL involving itself in issues that are not the responsibility of the CBL. The Central Bank should focus on managing the money supply, interest rates and overseeing the banking system, as well as serving as a place of last resort for loans in its broader purpose of stabilizing the economy. In a free enterprise economy, the Central Bank shouldn’t be dictating the specific business sectors for investors, but rather providing the environment for any business activity to succeed and managing the economic activities with any number of the available tools of monetary policies and banking system governance I mentioned above to sustain the stability of the economy. While I applaud his thoughts, I think that should be suggested to the appropriate agencies (e.g., Agriculture Ministry, Finance and Economic Planning and Commerce Ministries).

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